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Tidal shows the limits of using celebrity power to build a business

Large brands spend millions upon millions of dollars every year on celebrity endorsements.

For some brands, like Nike and H&M, writing large checks to prominent figures is a small price to pay for significant exposure and brand alignment with people who have their own powerful brands.

But building a new business, and a new business online, is a fundamentally different proposition than extending an established one and history thoroughly demonstrates that celebrity star power is rarely enough to get a new company off the ground successfully.

Perhaps the greatest example of that to date is Tidal, the recently-launched streaming music service owned by Jay-Z.

Tidal launched in a star-studded fashion, with some of music’s most recognizable faces including Madonna, Beyoncé, Alicia Keys and Daft Punk. By The Guardian’s estimate, the recording artists who associated themselves with the service have a collective net worth of $2.5bn.

Tidal’s promise, to “forever change the course of music history” is a big one, but just a few weeks in, not only does it appear unlikely that Tidal will realise that ambition any time soon, it appears unlikely that Tidal will be able to compete effectively with the incumbents in its market which include Spotify and Pandora.

As BGR noted last week, the Tidal app is no longer in the top 700 iPhone apps, while Spotify and Pandora have surged into the top 50 since Tidal’s launch. BGR suggests:

It looks like Tidal’s attacks on Spotify and Pandora actually managed to increase public awareness of the services, boosting Spotify’s download performance in particular at the end of March. And now, a few weeks later, the combined revenue performance of the two music apps is hitting a new milestone. To add insult to injury, Beats Music has started cracking U.S. iPhone top 20 revenue chart.

Observers are already dissecting Tidal’s missteps, from its pricing (it’s more expensive than its competitors) to its foolhardy attempt to convince consumers that some of the world’s wealthiest artists are getting a raw deal because other streaming services don’t pay them enough.

But Tidal’s struggles hint at the limits of celebrity to convince consumers to choose one option over others, despite having features that arguably should benefit it, such as exclusive content from popular musicians.

In the final analysis, Tidal’s failure to date is its over-reliance on celebrity as a differentiator. But rarely is celebrity a compelling enough differentiator to get consumers to flock. There has to be more.

Demonstrating that point is what will become perhaps one of the most successful celebrity-founded startups ever, The Honest Company.

Its co-founder, Jessica Alba, is a popular American actress, but the consumer goods upstart has become a billion-dollar business because of the value proposition it offers consumers – non-toxic household products – not because of who started it.

Certainly, Alba’s connections helped the company attract the people and capital necessary for success, but without a concept that appeals to consumers and their concerns about what their products are made of, Alba alone couldn’t have convinced consumers to give The Honest Company hundreds of millions of dollars a year.

And therein lies the secret for celebrities who want to succeed with startups: at the end of the day, it’s not about you, it’s about the people you want to be your customers.

Star power gives celebrities the ability to more easily reach consumers, but when they reach them, the message has to be about what the business will do for consumers, not about what consumers can do for the celebrity’s business.

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Damon Westbury is Interim MD at European Broadcaster Exchange (EBX), a joint venture founded by some of Europe’s largest TV broadcasters (including Channel 4) to address the demand for brand-safe environments and high-quality online video campaigns. Westbury joined EBX from Clear Channel and has previously held roles at Microsoft. He tells us: “After starting my […]